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2025 (4) TMI 1389 - HC - VAT / Sales TaxEntitlement for concessional central sales tax - respondent despite falling in the negative list would still be entitled to the tax rebate as set out in the notification dated 01.04.2013 that too for the period 2015-16 especially when it was not disputed before the authorities below that the industrial unit of the respondent falls in the negative list - failure to take into consideration the judgment of the Hon ble Supreme Court in Lloyd Electric and Engineering Limited vs. State of Himachal Pradesh Ors 2015 (9) TMI 370 - SUPREME COURT wherein the Hon ble Supreme Court has held that the State Government cannot speak in two voices - principles of natural justice - HELD THAT - In Ambica Quarry Works v. State of Gujarat and others 1986 (12) TMI 365 - SUPREME COURT the Hon ble Supreme Court held that the ratio of any decision must be understood in the background of the facts of that case. Relying on Quinn v. Leathem it has been held that the case is only an authority for what it actually decides and not what logically flows from it. In Union of India v. Amrit Lal Manchanda and another 2004 (2) TMI 361 - SUPREME COURT it has been stated by the Hon ble Supreme Court that observations of courts are neither to be read as Euclid s theorems nor as provisions of the statute and that too taken out of their context. The observations must be read in the context in which they appear to have been stated. To interpret words phrases and provisions of a statute it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. It was not disputed before the Hon ble Supreme Court that the appellant therein was found eligible for said concession since it satisfied the parameters prescribed in the notification till 31.03.2009. These incentives were thereafter extended not only for five years up to 19.05.2009 but were thereafter extended vide notification dated 29.05.2009 upto 31.03.2013 or till the time CST is phased out or whichever is earlier. This notification clearly excluded the industrial units specified in the negative list from the concessional rate of 1.5% of the taxable turnover of such goods w.e.f. 01.04.2013 for a period of five years or till the implementation of the Goods and Services Tax Act whichever is earlier - the notification clearly excluded the industrial units specified in the negative list from the concessional rate of 1.5% of the taxable turnover of such goods w.e.f. 01.04.2013 for a period of five years or till the implementation of the Goods and Services Tax Act whichever is earlier. Conclusion - i) The respondent s industrial unit being part of the negative list is not entitled to the concessional CST rate of 1.5% under the notification dated 01.04.2013. ii) The assessment imposing CST at the rate of 2% and associated interest and penalty is valid and rightly upheld by the assessing and appellate authorities. Appeal allowed.
The core legal questions considered in this judgment are:
1. Whether the respondent, whose industrial unit falls within the 'negative list' as per the Government notifications, is entitled to the concessional Central Sales Tax (CST) rate of 1.5% under the notification dated 01.04.2013, or whether the standard rate of 2% applies. 2. Whether the principle established by the Supreme Court in Lloyd Electric and Engineering Limited v. State of Himachal Pradesh, that the State Government cannot adopt contradictory policies ("cannot speak in two voices"), applies to the facts of this case to entitle the respondent to the concessional CST rate despite being in the negative list. 3. The proper interpretation and application of precedents, particularly the scope and binding nature of ratio decidendi versus obiter dicta, in the context of the present dispute. 4. Whether the learned Tribunal erred in setting aside the assessment and appellate orders on the basis of the Supreme Court's decision in Lloyd Electric without properly considering the factual and legal distinctions in the present case. 5. The competence of the State to define and apply the meaning of 'negative list' from notifications issued under different statutes for the purpose of CST concessions. Issue-wise Detailed Analysis: Issue 1: Entitlement to concessional CST rate despite inclusion in the negative list The relevant legal framework includes the Himachal Pradesh Industrial Policy 2004 and subsequent notifications issued under the CST Act, specifically the notification dated 01.04.2013, which provided a concessional CST rate of 1.5% for industrial units, excluding those specified in the negative list. The negative list was defined by earlier departmental notifications dated 30.03.2005 and 23.10.2009, issued under the Himachal Pradesh General Tax Act, 1968. The Tribunal accepted the respondent's claim to the concessional rate, relying on the Supreme Court's decision in Lloyd Electric, which emphasized a uniform policy approach by the State Government. However, the Court noted that the factual matrix in Lloyd Electric was materially different. In Lloyd Electric, the issue was the extension of a concessional CST rate beyond 31.03.2009, where the policy and notification timelines overlapped, and the unit was eligible under the policy. In contrast, the present case concerns the period after 01.04.2013, when the Government issued a fresh notification explicitly excluding industrial units in the negative list from the concessional rate. The respondent's unit was admitted to be in the negative list (Entry No. 22: Mini steel plants induction/Arc/Submerged furnaces and/or rolling mills), and thus, by the plain language of the notification dated 01.04.2013, was not entitled to the concessional rate. The Court held that the inclusion in the negative list precludes entitlement to the concessional tax rate. The respondent's payment of CST at 1.5% instead of 2% was therefore not justified under the statutory framework. Issue 2: Application of the principle that the State cannot speak in two voices The Supreme Court in Lloyd Electric held that once the State government adopts a policy, all its departments must speak with one voice, and no department can take a contradictory stand. The Tribunal relied heavily on this principle to set aside the assessment and penalty imposed on the respondent. However, the Court emphasized that the ratio of Lloyd Electric is confined to its facts, where the policy decision to extend the concessional rate was clear and undisputed, and the issue was the retrospective effect of the notification. The present case involves a subsequent policy and notification with explicit exclusion of certain industrial units from the concessional rate. The Court observed that the Tribunal failed to appreciate this distinction and erred in mechanically applying the Lloyd Electric principle without analyzing the factual differences. The Court further clarified that the Tribunal's criticism of the assessing and appellate authorities for alleged perfunctory adjudication was unwarranted and lacked cogent reasoning. Issue 3: Interpretation and application of precedents and ratio decidendi The Court undertook an extensive review of principles governing the binding nature of precedents, ratio decidendi, and obiter dicta, citing authoritative decisions from the UK House of Lords and the Supreme Court of India. It reiterated the settled position that:
Applying these principles, the Court found that the Tribunal's reliance on Lloyd Electric was misplaced as it failed to isolate the ratio and apply it appropriately to the materially different facts of the present case. Issue 4: Competence of the State to import meaning of 'negative list' from notifications under different statutes The respondent argued that the negative list defined under the Himachal Pradesh General Tax Act could not be imported into the CST Act notification dated 01.04.2013, since they are different statutes. The Court rejected this argument, stating that although ordinarily definitions from one statute do not govern another unless both are pari materia or there is express provision, the State was competent to rely on the departmental notifications defining the negative list when dealing with a cognate subject matter. The negative list's meaning was relevant and consistent with the policy intent to exclude certain industrial units from concessional CST benefits. Issue 5: Whether the Tribunal erred in setting aside the assessment and appellate orders The Court found that the Tribunal erred by not properly considering the factual and legal distinctions between the present case and Lloyd Electric. The Tribunal's observations that the assessment was perfunctory and lacked proper adjudication of mens rea and willful default were unsubstantiated and outside the scope of the issues before it. The Court emphasized that the assessment was in accordance with the notifications and the law, and the respondent's inclusion in the negative list disentitled it from the concessional rate. The Tribunal's order was therefore quashed and set aside, and the assessment order affirmed. Significant Holdings: "The State Government cannot speak in two voices. Once the cabinet takes a policy decision ... the Excise and Taxation Department cannot take a different stand. What is given by the right hand cannot be taken by the left hand. The Government shall speak only in one voice." (Lloyd Electric, as cited by the Tribunal) However, this principle applies only where the factual and policy matrix is consistent and undisputed. It does not permit overriding subsequent notifications that explicitly exclude certain units from benefits. "A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment." "Judicial utterances made in the setting of the facts of a particular case are not to be treated as if they were legislative enactments." "The State was well within its competence to rely upon the expression in 'Negative List' as assigned in the departmental notification ... when the notification was dealing with a cognate subject." Final determinations:
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